BE BOLD, BE DIFFERENT, THINK OF WHAT WILL
HELP THE CUSTOMER SUCCEED, & DON’T LET
YOUR TEAMS BUILD TECH FOR ITS OWN SAKE.
Aydin Kurt Elli // Pulsant

Acknowledgements

03

ScotlandIS and 9-20 recruitment would like to
thank everyone who took part in this year’s Scottish
Technology Industry Survey for their invaluable
input, providing feedback on performance in 2012,
and their forecasts for 2013.

03
04
06
07
08
10
12
13
14
16
17
18
20
21
22

Introduction
The Scottish Technology Industry Survey provides
a barometer of the health of the digital technologies
industry. We’ve decided again this year to analyse
the survey results with separate sections focussed
around smaller, mid-sized and larger companies
and use infographics to convey some of the results.
A detailed analysis of the employment and skills
outlook and an overview of the industry is also
included.
The digital technologies industry includes a wide
range of software, web, telecommunications, and
IT businesses, and is a major contributor to growth
in the Scottish economy, contributing over £4bn
to GVA. Digital technologies underpin innovation
and productivity improvements in all aspects of
business, and more than 100,000 people work in
digital technology roles.
Over one thousand businesses are involved in the
Scottish industry, delivering products and services
to end markets as diverse as health, energy,
aviation, financial services and the public sector.

This year’s survey was carried out by ScotlandIS in
January 2013. The survey analysis was undertaken
by ScotlandIS, with expert commentary from
9-20 recruitment on skills and recruitment. At
ScotlandIS, we’re very grateful to 9-20 recruitment
for their continued support for the survey.
We very much hope that this survey report
provides you with valuable insights into the Scottish
industry. Please do contact the ScotlandIS team
should you have any questions about the survey
or would like further information.

Polly Purvis // Executive Director, ScotlandIS
t
e

+44 (0) 1506 472200
polly.purvis@scotlandis.com
@scotlandis

www.scotlandis.com

Key Messages

04

05

Industry Growth and Optimism Employment Growth
• 71% of those surveyed are optimistic or very
optimistic about the outlook for the year ahead.

• 70% of companies plan to increase headcount
this year.

• 67% of respondents reported a rise in turnover
during 2012.

• Demand for graduates continues to be strong,
with 58% of respondents indicating they will
be looking for graduates, but more experienced
developers are the most in demand. (60% of
respondents plan to recruit operatives).

• The vast majority of companies (80%) expect
sales to grow in 2013 and only 8% expect sales
to decline.
• Mid-sized businesses (65–500 employees) are
the most optimistic about sales growth, with
four out of five expecting to increase sales by
more than 10% in 2013.

The Scottish Technology Industry
Survey provides an annual health
check for the digital technologies
industry. This year’s report provides
insights on company performance
in 2012 and predictions for 2013.

International Ambitions
There appears to be an increasing interest in international
markets amongst our respondents. With 53% of our sample
reporting they are already exporting and a further 13% not
yet exporting but planning to, two thirds of companies see
international markets as a key element of their business.
However 34% report they are unlikely to look beyond
domestic markets.

Note: A detailed analysis of the demand for
skills and other employment factors is
covered in the Employment and Skills
commentary on Page 22.

• Very large companies tend to be more cautious,
with half expecting little or only limited growth.

37%

International Opportunities

18%

27%

Respondents are increasingly moving into export markets. Over the last three years we have seen
a steady increase in the percentage of companies advising they are selling internationally:
ALREADY EXPORTING

PLANNING TO EXPORT

2011

39%

20%

2012

44%

14%

2013

53%

13%

Europe (66%) is seen as the most attractive
prospective overseas market followed by the USA
and Canada, (58%) and the Middle East (35%).
90% of respondents would work with other
Scottish companies to break into international
markets.

Exporting companies identified
the following markets as of
particular importance to
their businesses:

Europe
North America
Far East / Asia Pacific
Rest of the World

Headlines

06

Outlook for 2013

Sales Levels
Compared to 2011
2012 was another good year for the industry with
67% of respondents reporting growth in sales, up
from 60% in 2011, and a further 15% maintaining
sales at 2011 levels.
Stay the Same
0–10% Increase
10–20% Increase
20–50% Increase
50%+ Increase
0–10% Decrease
10–20% Decrease
20–50% Decrease
50%+ Decrease

23%

Expected Changes in Sales

Change in Employee Numbers

Companies in the industry are ambitious for 2013 with almost 80%
expecting to increase sales (up from 75% in 2012). The number of
companies expecting sales to fall in the coming year has dropped
from 16% in 2012, to 8% in 2013.

70% of respondents expect to take on more staff
during the year, an increase of 10% on last year.
With most other companies expecting to maintain
current staffing levels this underlines continuing
demand for skills. Commercial and business skills
(72%) and software and web development (67%)
are the key skill sets in demand.

The Scottish Digital Technologies Industry incorporates
a diverse range of sectors including software, telecommunications,
IT services and digital agencies. There is an increasing focus on
building software products, up from 12.4% in 2012 to 16% in
2013; this is particularly the case amongst smaller companies.

2012 was generally a good year for most smaller companies.
Over 63% reported increased sales, whilst 17% maintained
sales at 2011 levels. Most companies were able to maintain or
increase profit margins, although 27% saw margins squeezed.

Whilst 42% of smaller companies do not anticipate the need for
additional finance during the year, respondents are likely to seek
additional finance from private investors (eg business angels) [25%],
bank finance [15%] or grant funding [13%]. Significantly whilst one in
eight businesses report cash flow to be substantially more difficult
than a year ago, overall cash flow pressures seemed to have eased
with two thirds reporting cash flow easier or little changed.

Two thirds of smaller companies expect to take
on additional staff during the course of 2013,
with most others expecting to maintain headcount
at current levels.

Benchmark 1:
Smaller Companies

Strong software and web skills top the technical
skills in demand, closely followed by mobile
development skills, Java and content creation.
Sales, digital marketing and project management
are the top three commercial skill sets in demand.

1–35 Employees

Predominantly engaged in software
development and services, web and
e-commerce, smaller companies form
the vast majority of our respondents.
60% of these are micro businesses
with turnover of less than half a million
pounds. They tend to be younger
companies with the vast majority
formed in the last fifteen years and
35% since 2006. Funding mainly
comes from founders’ capital and
retained profits. (80% of businesses).

37%

64%

17%

27%

International Sales

Looking Forward to 2013

47% of smaller companies are already exporting and a further
16% are planning to do so. 37% of smaller companies advised
that they don’t currently export and are unlikely to do so.

Smaller companies are confident of being able to grow their
business during 2013 with four fifths of smaller companies
forecasting increased sales. 60% expect to increase sales
by more than 10% with a further 20% expecting single
figure growth. 13% anticipate they will maintain sales at
current levels, with 7% expecting a slight dip in sales.

FOCUS ON INNOVATION AND
EXCELLENCE IN SERVICE DELIVERY.
Susan Chadwick // Edge Testing

3%

Benchmark 2: Mid-sized Companies

14

Reflections on 2012

Financial Environment

People and Skills

Mid-sized companies had an excellent 2012. Four out of five
increased sales, with 35% increasing sales by 10–20% and
a further 31% by between 20 and 50%. Most maintained or
slightly improved profit margins but 15% reported slightly
reduced margins.

Most mid-sized companies appear comfortable that
they have the working capital to fuel their planned
growth with 58% reporting they won’t need access
to additional finance during 2013. 27% would approach
their banks for additional finance whilst 12% would raise
further private investment.

Demand for skills is strong amongst mid-sized companies
with a substantial 89% planning to take on additional staff
during the course of the year. 23% expect to increase
headcount by between 1 and 5 people, a further 54% are
looking for between 6 and 20 new staff, and 12% are seeking
more than 20 additional staff during the course of 2013.

Overall mid-sized companies report little change in cash
flow with if anything a slight easing from last year.

Mid-size companies identified software development followed
by mobile and open source, as the key technical skills they
are seeking. On the commercial side pre-sales, and product
marketing were highlighted as the top skills in demand.

Benchmark 2:
Mid-sized Companies
36–500 Employees

Mid-sized companies are mainly
involved in software product, software
solutions and services and infrastructure
and network management. These
businesses employ between 36 and
500 employees and form 18% of the
survey total. Turnover ranges from £1
to £100 million. They are predominantly
Scottish-based and owned and most
have been established for more than
ten years. Mid-sized companies are
primarily funded through a combination
of founder’s capital and retained
profits, although 18% have angel
or venture capital investment.

80%

5%

15%

International Sales

Looking Forward to 2013

58% of mid-sized companies are already exporting and a further
11% are planning to do so. 31% of smaller companies advised
that they don’t currently export and are unlikely to do so.

Nearly all mid-sized companies are planning growth
during 2013 – just over 80% expect to increase sales
by more than 10% with a further 16% expecting single
figure growth or sales levels in line with last year.
10%+ Increase
1–9% Increase
Stay the Same
Decrease

31%

15

11%

81%

58%
12%

4%

3%

Mid-sized Companies: Financial

16

Mid-sized Companies: Sales

Funding Models
Founders Capital and Retained Profits

63%

Mix of Business Angel / Bank / Loan Funding

10%

Mainly Venture Capital

12%

Unlisted PLC

0%

Quoted Company

0%

Alternative Investment Market (AIM)

8%

Other

7%

17

Actuals Compared
to Budget

2012 Sales Compared to 2011 Sales
35%

Increased Significantly
Increased Slightly
Stayed Much the Same
Decreased Slightly

BE PREPARED TO NEGOTIATE ON
EVERY ASPECT OF THE BUSINESS.
Joan Hill // Interactive Intelligence

Benchmark 3: Larger Companies

18

Benchmark 3:
Larger Companies

Reflections on 2012

Financial Environment

People and Skills

Larger companies generally report good results for 2012.
Two thirds increased sales with 39% increasing sales by more
than 10% and a further 26% achieving single figure growth.
18% of larger companies maintained sales at 2011 levels, but
17% reported a slight reduction in sales, from the previous year.

Three quarters of larger companies do not
anticipate needing additional finance in 2013.
Those that do would use the capital markets
to raise further funds. Generally larger
companies report cash flow as being steady
or slightly more difficult.

Demand for skills amongst larger companies provides a complex picture.
Whilst 32% report they will be increasing headcount by more than 20
additional staff, 26% expect to reduce staffing slightly, and a further 21%
plan to maintain staffing at current levels. One in five larger companies
indicate they will slightly increase their staff numbers, taking on between
one and 20 new staff.

Most large companies reported profit margins as staying
much the same as in 2011, although 27% indicated margins
had come under slight or substantial pressure.

Larger companies highlighted .net, SharePoint and enterprise level
development skills, as being key skill sets they need, On the commercial
side leadership skills came through strongly.

500–1000 Employees

Our larger company respondents
are primarily involved in systems
integration, and software solutions
and services. Over three quarters
have a turnover of £50m+. They tend
to be well established companies with
the majority formed over 15 years
ago and 60% formed before 1983.
Many are quoted companies but
one in five is VC funded.

66%

17%

17%

International Sales

Looking Forward to 2013

84% of larger companies are already exporting and a further
4% are planning to do so. However 12% of respondents reported
that they don’t currently export and are unlikely to do so.

Over half (63%) the larger companies are planning
growth during 2013. 31% expect to increase sales
by more than 10% with a further 32% expecting single
figure growth. 19% expect sales to stay in or sales
levels in line with last year, but providing a note of
caution 18% expect sales to reduce.

CONTROL RISK. STAY FOCUSED.
KEEP ON TOP OF CASH.
John Innes // Amor Group

22

Employment
Commentary
Employmentand
andSkills
Skills
Commentary

Job vacancies up but skills crisis threatens growth
of Scotland’s booming digital technologies
Talented candidates looking for new opportunities should look
to the SME and mid-sized companies as this is where the action
lies. It appears that the corporate markets are still feeling the
pinch and therefore plan for a year of consolidation or even
a slight decline in employee numbers. However, the mid-sized
markets are pushing forward with demand for mobile and
C#/Java development, as well as product and content marketing
skill sets.

Drawing on observations from this year’s respondents, the
companies that invested in their product offerings and export
channels over the last couple of years are the companies
pushing for growth. Therefore those investing in new talent
now, will push their companies forward while others plateau
(or even decline). The level of roles currently in demand is at
the operative level, around £23–35k.

Wendy McDougall // Managing Director, 9-20 recruitment
t
e

+44 (0) 141 331 4375
wmcdougall@9-20recruitment.com
@920recruitment

www.9-20recruitment.com

23

Most sought after skills
Those with software and web development skills
are the most sought after at 58% (67% last
year), just ahead of commercial and business
skills at 53% (72% last year) and project
management skills at 49%.

Most in demand category of staff
Operatives topped the category of staff most in
demand this year at 60% up from 47% last year.
Graduates are just slightly behind this at 58%
this year (having been top at 52% last year).

Demand to increase headcount
The number of respondents planning to increase
headcount this year is 70% (63.5% last year).

About ScotlandIS
• ScotlandIS represents the digital technology industries,
including software, telecommunications, IT and digital media
businesses.
• ScotlandIS members vary from internationally recognised
exporters to very small startups and cover a wide range
of skills and markets.
• Scotland’s software, IT and communications businesses
employ more than 70,000 people and currently generate
approximately £4 billion: around 5% of Scotland’s GDP.
• ScotlandIS promotes the industry and lobbies government
and policy makers on issues of importance to the sector.
• ScotlandIS stimulates networking and partnerships between
member organisations, providing networking, training and
best-practice exchange meetings, seminars and workshops.
• ScotlandIS provides practical support to help members trade,
for example, by providing access to industry experts and
disseminating market intelligence.
• ScotlandIS works in partnership with e-skills UK (the sector
skills council for ICT), government and academia to create
and retain the skills and infrastructure required to support
the knowledge economy.

TODAY’S SURVEY RESULTS AND INDUSTRY FINDINGS REINFORCE
THE MESSAGE THAT COMES BACK AGAIN AND AGAIN FROM
OUR MEMBERS. THEY ARE GOING FOR GROWTH AND THERE
IS SIGNIFICANT PENT UP DEMAND FOR SKILLED PEOPLE IN
THE DIGITAL TECHNOLOGY INDUSTRIES.
THERE’S AN INCREASING BUZZ ABOUT THE INDUSTRY AS BUSINESS
AND GOVERNMENT TRANSFORM THEIR OPERATIONS THROUGH THE
SMART APPLICATION OF TECHNOLOGY. WE’RE SEEING INCREASING
CONFIDENCE ACROSS THE INDUSTRY, FROM START-UPS TO THE
GROWING NUMBER OF SCOTTISH DIGITAL TECHNOLOGY BUSINESSES
CARVING OUT EXPORT MARKETS AROUND THE WORLD.
Polly Purvis // Executive Director, ScotlandIS

THE SURVEY RESULTS ARE GREAT NEWS FOR THE HUNDREDS
OF NEWLY QUALIFIED GRADUATES WHO WILL BE HITTING THE
MARKET IN THE SUMMER. THE CHALLENGE IS KEEPING THE
TALENT COMING THROUGH THE PIPELINE FROM UNIVERSITIES
AND COLLEGES TO KEEP UP WITH THE DEMAND FOR SKILLED
WORKERS IN THE DIGITAL TECHNOLOGY INDUSTRIES.
Wendy McDougall // Managing Director, 9-20 recruitment

THE SCOTLANDIS ANNUAL SURVEY CONFIRMS WHAT AMOR
HAS SAID IN THE PAST, NAMELY, THE SOFTWARE INDUSTRY IN
SCOTLAND IS CRYING OUT FOR SUITABLY QUALIFIED GRADUATES,
GROWTH IN OUR INDUSTRY IS BEING RESTRICTED, AND SCOTLAND
IS LOSING OUT TO OTHER COUNTRIES. IT IS UNACCEPTABLE IN
THE MIDST OF A WORLD-WIDE DIGITAL REVOLUTION THAT
SCOTLAND DOESN’T HAVE ENOUGH TALENTED GRADUATES TO
EXPLOIT FANTASTIC GLOBAL OPPORTUNITIES. IN ORDER TO BE
SUCCESSFUL, SCOTLAND NEEDS MORE QUALIFIED GRADUATES,
WE NEED TO ENCOURAGE AND PROVIDE THE OPPORTUNITIES
FOR THE NEXT GENERATION OF STUDENTS TO BE PART OF SUCH
A SUCCESSFUL INDUSTRY.
Alastair O’Brien // Public Sector Director of Amor Group
and Deputy Chair of ScotlandIS

STARTUPS LIKE OURS ARE HAVING A CHALLENGING TIME FINDING
QUALIFIED SOFTWARE DEVELOPERS. STARTUPS NEED TO FOCUS
ON A LEAN DEVELOPMENT ENVIRONMENT SO WE CAN PROTOTYPE
CHEAPLY AND GET TO MARKET FAST. THE SKILLS NEEDED IN THE
LEAN DEVELOPMENT ENVIRONMENT SUCH AS RUBY CODING ARE
IN PARTICULARLY SHORT SUPPLY.
Steven Drost // CEO of Stipso